Shares of fiber-optic component maker Viavi Solutions (VIAV), potentially a key supplier to Apple (AAPL) for parts of the forthcoming “iPhone X” for “augmented reality,” are down 27 cents, or 2.5%, at $10.36, after the company yesterday afternoon reported fiscal Q4 revenue and profit that topped analysts’ expectations, but missed with its outlook for this quarter, sending its shares lower in late trading.

It’s a mixed bag: Viavi’s initial payoff from being involved in the iPhone is going to be less than expected, because prices will be lower than people thought; but the company’s role in 3-D sensing technology broadly speaking, at Apple and elsewhere, seems also to be reinforced in the view of both bull and bear.

B. Riley’s Dave Kang reiterates a Buy rating, but cuts his price target to $12.50 from $14. He’s still excited about the company’s role in 3-D sensing, but he notes the outlook now shows a diminished role in the iPhone and lower prices for its parts:

Because of short lead-times and revenue recognition policy (one quarter lag), the company expects to ship 3DS filters in F2Q, with peak revenue expected in F3Q. VIAV expects 3DS revenue to be $35MM-$45MM in FY18; below our estimate of $55MM. Based on LITE’s 3DS data, we estimate the new 3DS iPhone volume will be in the range of 80MM-100MM in FY18. Thus, based on VIAV’s FY18 projection of $40MM, we now believe filter ASPs are below $0.50. Furthermore, there will only be one VIAV filter per iPhone instead of two. This is because the filter will be used for facial recognition applications and not AR (Augmented Reality) applications which will be fulfilled by low-end commodity filters. Other than smartphones, sensors for automobiles appear to be another compelling application.

Alex Henderson with Needham & Co. reiterates a Hold rating, writing that he’s cutting his estimates for Viavi’s “core” products, while adding revenue of $7 million for 3-D sensing for the balance of this year.

3-D sensing is now taking “center stage,” he writes. But Henderson notes “the bulls have been counting on 3D-sensing to drive profitability,” and that the “core weakeness” is now offsetting much of it. “With estimates only creeping up with the inclusion of $64 million in calendar 2018 3-D revenue, we see Viavi at 18.5 times enterprise value to earnings as fully or even more than fully valued."

"Even if we double our 3D Sensing forecast to $120 million, which we think is way too high, VIAV would still be at 16x EV/E, a rich valuation in our view."

Patrick Newton with Stifel Nicolaus reiterates his Hold rating, and an $11 price target, and he, like Kang, is cutting his estimate for pricing for the 3-D sensing parts, writing, "we are moderating our 3DS revenue estimate from $50M in FY18 to $40M, keeping our unit assumption the same but moderating our ASP assumption to $0.40/unit (from $0.50) as we believe Viavi is aggressively reducing cost to best position the company for higher 3DS volume opportunities in FY19 and beyond."

"We continue to model 100% share at Apple for the initial launch with management highlighting a strong positioning in conversations with all leading OEMs considering adopting the technology."

He continues, "We now expect more than 80% of the 3DS contribution will come in the 2H of FY18. The delay in revenue recognition, relative to others in the supply chain that recognize revenue on sell-in, stems from the combination of shorter lead times and final acceptance/testing done once the module is assembled with all components."

Facebook shares drop almost 7% on Friday's disclosure of mishandling of user data by the consulting firm Cambridge Analytica, KLA-Tencor buys fellow chip equipment maker Orbotech, Deutsche Bank analysts are bullish on fiber optics name II-VI but negative on Arista Networks, GrubHub stock is getting pricey according to Stifel analyst John Egbert, Fitbit finds a new believer in Craig-Hallum's Alex Fuhrman, ex-chairman Paul Jacobs of Qualcomm is hoping analysts will vote in sympathy with him at the company's shareholder meeting on Friday, Dell topped server sales in Q4 and bumped aside Hewlett Packard Enterprise, Google's Diane Greene is mulling a big acquisition to boost the company's cloud services, Apple is moving forward with its own display technology called "micro LED," and Oracle is set to report results after the closing bell.

"While it's background noise for investors in the near-term, with the News Feed overhaul and other actions that Facebook has implemented over the past few months, its clear with more 'heat in
the kitchen from the Beltway' that further modest changes to their business model around advertising and news feeds/content could be in store over the next 12 to 18 months," analyst Daniel Ives wrote.

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